Acquisition of Arco adds acreage in inlet leases

New year, new plans for Phillips Petroleum

Plans for a new well near Anchor Point as well as installation of production equipment at a western Cook Inlet gas field share the bulk of Phillips Alaska Inc.'s capital spending for 2001.

Phillips plans $8 million in Cook Inlet spending, most of which will go toward new production equipment at the Moquawkie gas field in western Cook Inlet and upgrades to its Tyonek Platform. Spending for the Anchor Point well comes from Phillips' statewide exploration budget.

The year 2000 was one of change for Phillips. In March, BP Amoco agreed sell Arco Alaska Inc. to Phillips for $7 billion to clear the way for Federal Trade Commission approval of BP's acquisition of the rest of Atlantic Richfield Co. Before the merger, Phillips' main presence in the state was in Nikiski, where it owns a 70 percent share with Marathon Oil Co. in the plant that liquefies Cook Inlet natural gas. Its Tyonek Platform produces natural gas for the plant.

Headquarters:

Bartlesville, Okla.

Alaska manager:

Arnie Holhjem

Employees: 60

Production in 2000:

248 million cubic feet of gas per day

2001 capital expenditures:

$8 million in Cook Inlet

Local phone:

776-8166

Outlook for 2001: Phillips plans to drill a new well near Anchor Point, add production facilities at the Moquawkie gas field and complete upgrades to the Tyonek Platform.

Phillips' acquisition of Arco Alaska added significant acreage in Cook Inlet leases. Phillips spokesperson Dawn Patience said the company added 41,800 acres of undeveloped inlet leases to Phillips' 7,000 acres in the region. Although some leases have reverted to the state, Patience said, offshore as well as onshore prospects total 47,440 acres. Phillips also acquired interest in the Beluga gas field.

The Anchor Point well is planned a few miles north of Anchor Point and will use directional drilling to reach an offshore prospect, Patience said. She declined to give the exact location of the site because permit filings are ongoing.

"We're trying to get all the unit permits filed in the first half of the year," Patience said. "And hopefully the well will be drilled in the second half."

Phillips Cook Inlet asset manager Scott Jepsen said the company plans to install production facilities near Anadarko Petroleum Co.'s Lone Creek Well No. 1 in the Moquawkie gas field. Phillips is a 50 percent partner with Anadarko in the project.

Anadarko will be the exploration operator and Phillips will take the lead in production, Jepsen said. Anadarko struck gas with its first Moquawkie well two years ago.

Plans call for the installation of a compressor, equipment to remove water from the gas , metering equipment and pipeline to eventually connect with the Enstar Natural Gas Co. pipeline at Beluga.

The route could involve the use of a Marathon Oil pipeline, and Jepsen said negotiations are continuing. Jepsen added that Enstar will buy the gas.

Jepsen said Phillips just finished drilling a second well in the area.

"The second well was a disappointment," Jepsen said. "Right now, we don't have plans for any more wells. Anything in the future will depend on the performance of the existing wells."

Work on the Tyonek Platform will aim to stabilize production, which Phillips depends on to supply the LNG plant. Once liquefied, the gas is shipped on Marathon-owned ships to Japanese gas and electric utilities.

Jepsen said platform upgrades include two gas turbine-driven compressors that will boost the available horsepower to around 12,600, compared with the current 8,700-horsepower capacity.

Also included are the installation of larger-diameter processing lines.

"The Tyonek improvements are about 90 percent complete," Jepsen said. "We should start the compressor additions this month."

He said the increased compression is needed as the pressure in the reserve falls.

Other capital project spending includes general maintenance at the LNG plant and the Beluga field.

"There are always capital project things that you spend money on in a maintenance capacity," Jepsen said. "Things wear out -- it's like owning a car."